SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
ONEOK, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
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ONEOK, Inc.
Notice of Annual Meeting
and
Proxy Statement
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May 16, 2002
[LOGO] ONEOK
100 West Fifth Street Tulsa, Oklahoma 74103
[LOGO] ONEOK
April 10, 2002
Dear Shareholder:
You are cordially invited to attend the annual meeting of ONEOK, Inc. at
10:00 a.m. on Thursday, May 16, 2002, at ONEOK Plaza, 100 West Fifth Street,
Tulsa, Oklahoma 74103-4298.
We look forward to greeting personally as many of our shareholders as
possible at the meeting. The matters to be voted on at the meeting are stated
in the Notice of Annual Meeting of Shareholders and are described in the Proxy
Statement. A report on the operations of ONEOK, Inc. will be presented.
We know that most of our shareholders are unable personally to attend the
annual meeting. Therefore, proxies are solicited so that each shareholder has
an opportunity to vote by proxy. You can authorize a proxy by signing, dating,
and returning the enclosed proxy card. Shareholders whose stock is registered
in their name may also authorize a proxy by telephone or over the Internet.
Instructions for using these convenient services are set forth with this Proxy
Statement and on the proxy card. I urge you to submit your proxy as soon as
possible so that you can be sure your shares will be voted.
Regardless of the number of shares you own, your vote is important. Thank
you for your continued interest in ONEOK, Inc.
Very truly yours,
/s/ David Kyle
David Kyle
Chairman of the Board, President,
and Chief Executive Officer
Notice of Annual Meeting of Shareholders
Time and Date: 10:00 a.m., local time, Thursday, May 16, 2002
Place: ONEOK Plaza, 100 West Fifth Street, Tulsa,
Oklahoma 74103-4298
Items of Business: -- Elect four directors in Class B to serve a
three-year term.
-- Ratify the appointment of our principal
independent auditors for the 2002 Fiscal Year.
-- Transact such other business as may properly
come before the annual meeting or any
adjournments.
Your Board of Directors recommends that you vote
in favor of the two proposals outlined in this
proxy statement.
Who May Vote: You may vote if you owned shares of ONEOK common
stock at the close of business on March 18, 2002.
Proxy Voting: Your vote is important. Please vote in one of
these ways:
-- visit the website listed on the next page
under "Voting Methods";
-- use the toll-free telephone number shown on
the next page under "Voting Methods";
-- mark, sign, date and promptly return the
enclosed proxy card in the postage-paid
envelope; or
-- attend the meeting and vote in person if you
are a shareholder of record or a street name
holder who has obtained a legal proxy from
your street name nominee.
Annual Report: A copy of our 2001 annual report, which contains
financial and other information about ONEOK, is
enclosed.
Date of Mailing: This notice and proxy statement, together with
the 2001 annual report, is first being mailed to
shareholders on or about April 10, 2002.
By Order of the Board of Directors
/s/ John A. Gaberino, Jr.
John A. Gaberino, Jr.
Senior Vice President, General Counsel
and Corporate Secretary
Voting Methods
The accompanying Proxy Statement describes important issues affecting ONEOK,
Inc. If you are a shareholder of record, you have the right to vote your shares
in person at the meeting or to appoint a proxy through the Internet, by
telephone, or by mail. Each method is generally available 24 hours a day and
will ensure that your proxy is confirmed and posted immediately. You may revoke
your proxy any time before the annual meeting. Please help us save time and
postage costs by appointing a proxy via the Internet or by telephone.
When you appoint a proxy via the Internet, or by telephone or proxy card, you
are appointing David L. Kyle and John A. Gaberino, Jr. as your representatives
at the annual meeting, and they will vote your shares as you have instructed
them.
To appoint a proxy:
1. Via the Internet
a. Go to the web site at http://www.eproxyvote.com/oke, 24 hours a
day, 7 days a week.
b. Enter the control number that appears on the proxy card. This
process is designed to verify shareholders through the use of the
control number and allows you to vote your shares and to confirm
that your instructions have been properly recorded.
c. Follow the simple instructions.
d. Appointing a proxy through the Internet is also available to
shareholders who hold their shares in the Direct Stock Purchase
and Dividend Reinvestment Plan of ONEOK, Inc. and the Thrift Plan
for Employees of ONEOK, Inc. and Subsidiaries.
e. If you appoint a proxy via the Internet, you do not have to mail
your proxy card.
2. By telephone
a. On a touch-tone telephone, call toll-free 1-800-758-6973, 24 hours
a day, 7 days a week.
b. Enter the control number that appears on the proxy card. This
process is designed to verify shareholders through the use of the
control number and allows you to vote your shares and to confirm
that your instructions have been properly recorded.
c. Follow the simple recorded instructions.
d. Appointing a proxy via the telephone is also available to
shareholders who hold their shares in the Direct Stock Purchase
and Dividend Reinvestment Plan of ONEOK, Inc. and the Thrift Plan
for Employees of ONEOK, Inc. and Subsidiaries.
e. If you appoint a proxy via the telephone, you do not have to mail
your proxy card.
3. By mail
a. Mark your selection on the proxy card.
b. Date and sign your name exactly as it appears on your proxy card.
c. Mail the proxy card in the enclosed postage-paid envelope.
If your shares are held in the name of a bank, broker or other holder of
record, you will receive instructions that you must follow from the holder of
record in order for your shares to be voted.
Your vote is important. Thank you for voting
Table of Contents
for the Proxy Statement
Page
Quorum and voting........................................... 1
Questions and answers....................................... 2-4
Proposals you may vote on................................... 5
Nominees for the Board of Directors/Continuing Directors.... 6-8
Statement on corporate governance........................... 9
Committee structure and membership roster................... 9-10
Report of the Audit Committee............................... 11
Fees paid to independent auditor............................ 12
Directors' compensation..................................... 13
Directors' and officers' ownership of ONEOK, Inc. stock..... 14-16
Executive compensation: Report of the Compensation Committee 17-20
Stock performance graph..................................... 21
Executive compensation, pension plans & other arrangements
Summary compensation table.............................. 22-23
Option/SAR grant table...................................... 24
Aggregated option/SAR exercises and year-end values......... 25
Pension plans............................................... 26
ONEOK, Inc. supplemental executive retirement plan.......... 27
Change in control and termination agreements................ 28-29
Section 16(a) beneficial ownership reporting compliance..... 30
Other matters............................................... 30
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Proxy Statement
The approximate date of the mailing of this Proxy Statement and proxy card is
April 10, 2002. This solicitation of proxies is being made by the Board of
Directors of ONEOK, Inc.
Quorum and voting
Record Date. The record date for the meeting is March 18, 2002. Only
shareholders of record at the close of business on that date are entitled to
notice of, and to vote at, the meeting.
Voting Stock. The only class of stock entitled to be voted at the meeting is
ONEOK's common stock. At the close of business on the record date, there were
60,259,570 shares of common stock outstanding and entitled to be voted at the
meeting, and the holders of those shares will be entitled to one vote per share.
Quorum and Votes Required. A quorum is a majority of the outstanding shares,
which may be present at the meeting or represented by proxy. There must be a
quorum for the meeting to be held. Directors are elected by a plurality of the
shares voted. Proposal #2 must receive the affirmative vote of a majority of
the shares present in person or by proxy to be adopted. If you appoint a proxy,
even if you abstain from voting, you will be considered part of the quorum.
Adjourned Meeting. If a quorum is not present at the scheduled time of the
meeting, the shareholders who are represented may adjourn the meeting until a
quorum is present. If the time and place of the adjourned meeting are announced
at the time the adjournment is taken, no other notice will be given. If the
adjournment is for more than thirty (30) days, or if a new record date is set
for the adjourned meeting, a notice will be given to each shareholder of record
entitled to vote at the meeting. An adjournment will have no effect on the
business that may be conducted at the meeting.
Voting of Shares Held in Street Name by Your Broker. Brokerage firms have
authority under New York Stock Exchange Rules to vote customers' unvoted shares
on certain "routine" matters, including the election of directors. If you do
not appoint a proxy to vote your shares, your brokerage firm may either vote
your shares on routine matters or leave your shares unvoted. We encourage you
to provide instructions to your brokerage firm by appointing a proxy to vote
your shares. This ensures your shares will be voted at the meeting. When a
brokerage firm votes its customers' unvoted shares on routine matters, these
shares are counted for purposes of the vote and for purposes of establishing a
quorum to conduct business at the meeting. A brokerage firm, however, cannot
vote customers' shares on non-routine matters. Accordingly, these shares
(sometimes referred to as "broker non-votes") are considered not entitled to
vote on the non-routine matters.
Abstentions. If you abstain from voting, your shares will nevertheless be
included in the number of shares represented for purposes of determining
whether a quorum is present. Because directors are elected by a plurality of
the votes, an abstention would have no effect on the outcome of the vote on
proposal #1 -- Election of Directors, and thus, is not offered as a voting
option for that proposal. However, abstentions are effectively treated in the
tally of votes against proposal #2.
Tabulation of Votes. ONEOK's transfer agent will be responsible for tabulating
and certifying the votes.
Default Voting. If you properly authorize a proxy electronically via the
Internet, by telephone, or in paper form, but do not indicate any voting
instructions, your shares will be voted as follows:
. Proposal 1 -- Election of Directors -- FOR all nominees.
. Proposal 2 -- Ratification of the appointment of our principal
independent auditors for the 2002 Fiscal Year -- FOR.
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Questions and answers
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1. Q: Who may attend the Annual Meeting?
A: All shareholders on March 18, 2002, may attend. If your shares
are held by your broker, often referred to as "in street name",
just bring a copy of your brokerage account statement or a proxy
card which you can get from your broker.
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2. Q: Who are the largest principal shareholders?
A: As of March 18, 2002, the record date, the following are known to
be the beneficial owners of more than five percent (5%) of any
class of ONEOK's outstanding voting securities:
Title of class and name &
address of beneficial owner
Amount and Nature of Percentage
Common stock: Ownership of Class
------------- --------- --------
Bank of Oklahoma, N.A.
Trustee for the Thrift Plan for Employees of
ONEOK, Inc. and Subsidiaries
P.O. Box 2300
Tulsa, OK 74192 6,730,073 11.2%
Westar Industries, Inc./1/
818 Kansas Avenue
Topeka, KS 66612-1217 4,480,533 7.4%
Preferred stock (Series A):
Westar Industries, Inc./1/
818 Kansas Avenue
Topeka, KS 66612-1217 19,946,448 100%
/1/ Westar Industries, Inc. is an affiliate of Western Resources,
Inc. As of 03/18/02 Westar Industries, Inc. owned
approximately 44.3% of the outstanding shares of the capital
stock of ONEOK. Holders of the outstanding convertible
preferred stock (Series A) are not entitled to vote on any
matters being considered at this annual meeting.
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3. Q: How do I vote?
A: You may vote in person at the meeting or appoint a proxy via the
Internet, by telephone, or by mail to vote your shares. Following
the Notice of Annual Meeting is a description of the Voting
Methods available this year. As outlined on Page 1, "Quorum and
Voting", if you return a signed card but do not provide voting
instructions, your shares will be voted for the two proposals.
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4. Q: How do I revoke my proxy?
A: You have the right to revoke your proxy at any time before the
meeting by:
(1) notifying ONEOK's Corporate Secretary in writing;
(2) authorizing a different proxy via the Internet;
(3) authorizing a different proxy by telephone;
(4) returning a later-dated proxy card; OR
(5) voting in person.
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5. Q: Is my vote confidential?
A: Proxy cards, ballots and voting tabulations that identify
individual shareholders are mailed and returned directly to the
Proxy Tabulator and handled in a manner that protects your voting
privacy. It is ONEOK's policy to protect the confidentiality of
shareholder votes throughout the voting process. In this regard,
the vote of any shareholder will not be disclosed to ONEOK's
Directors, officers or employees, except:
. to meet legal requirements; or
. to assert or defend claims for or against ONEOK; or
. except in those limited circumstances where
(1) a proxy solicitation is contested;
(2) a shareholder writes comments on a proxy card; or
(3) a shareholder authorizes disclosure.
Both the tabulators and the inspectors of election have been, and
will remain, independent of ONEOK. Nothing in this policy
prohibits shareholders from disclosing the nature of their votes
to ONEOK's Directors, officers or employees, or impairs voluntary
communication between ONEOK and its shareholders, nor does this
policy prevent ONEOK from ascertaining which shareholders have
voted or from making efforts to encourage shareholders to vote.
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6. Q: How is ONEOK, Inc. common stock in the Thrift Plan voted?
A: Thrift Plan votes receive the same confidentiality as all other
shares voted. If you hold shares of ONEOK, Inc. common stock
through the Thrift Plan, you must instruct the ONEOK, Inc.
trustee, Bank of Oklahoma, N.A., how to vote your shares. If you
do not authorize a proxy electronically via the Internet, by
telephone, or by mail, or if you return it with an unclear voting
designation, or with no voting designation at all, then the
trustee will vote the shares in your account in proportion to the
way the other Thrift Plan participants voted their shares.
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7. Q: How will voting on any other business be conducted?
A: Although we do not know of any business to be considered at the
2002 annual meeting other than the proposals described in this
Proxy Statement, if any other business is properly presented at
the annual meeting in accordance with Sections 2.11(b) of our
By-laws, your signed proxy card gives authority to David L. Kyle,
ONEOK's Chairman of the Board, President, and Chief Executive
Officer; and John A. Gaberino, Jr., Senior Vice President,
General Counsel and Corporate Secretary, to vote on these matters
at their discretion.
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8. Q: What shares are included on the proxy card(s)?
A: The shares on your proxy card(s) represent ALL of your shares,
including those in ONEOK's Direct Stock Purchase and Dividend
Reinvestment Plan and shares held in custody for your account by
Bank of Oklahoma, N.A., as trustee for the Thrift Plan for
Employees of ONEOK, Inc. and Subsidiaries. If you do not
authorize a proxy electronically via the Internet, by telephone,
or by mail, your shares, except for those held in the Thrift
Plan, will not be voted. See Question #6 for an explanation of
the voting procedures for the Thrift Plan shares.
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9. Q: What does it mean if I receive more than one proxy card?
A: If your shares are registered differently and are in more than
one account, you will receive more than one proxy card and Proxy
Statement. Sign and return all proxy cards to ensure that all
your shares are voted. We encourage you to have all accounts
registered in the same name and address whenever possible. Also,
you can request that only one Proxy Statement and one Annual
Report be mailed to the same address. You can accomplish this by
contacting our transfer agent, UMB Bank, N.A. at 1-866-235-0232.
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10. Q: When are shareholder proposals for inclusion in the Proxy
Statement for the 2003 annual meeting due?
A: All shareholder proposals to be considered for inclusion in next
year's Proxy Statement must be submitted in writing to the
Corporate Secretary of ONEOK, Inc., 100 West Fifth Street, Tulsa,
OK 74103-4298 by December 12, 2002. ONEOK will determine whether
or not to include such proposal in the Proxy Statement according
to applicable law. It is recommended that proposals be sent by
certified mail, return receipt requested.
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11. Q: What out-of-pocket costs will ONEOK incur in soliciting proxies?
A: Morrow & Co., Inc. was hired to assist in the distribution of
proxy materials and solicitation of votes for $8,500, plus
out-of-pocket expenses. We also reimburse brokerage houses and
other custodians, nominees, and fiduciaries for their reasonable
out-of-pocket expenses for forwarding proxy and solicitation
materials to shareholders. The cost of soliciting proxies will be
borne by ONEOK, Inc.
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12. Q: Who is soliciting my proxy?
A: The Board of Directors of ONEOK, Inc. is sending you this Proxy
Statement in connection with its solicitation of proxies for use
at ONEOK's 2002 annual meeting of Shareholders. Certain
directors, officers and employees of ONEOK also may solicit
proxies on our behalf by mail, telephone, fax or in person.
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-4-
Proposals you may vote on
1. Election of four Directors in Class B -- term ending 2005.
There are 4 director nominees for election this year. The nominees for
directors are:
. William M. Bell;
. John B. Dicus;
. David L. Kyle; and
. Pattye L. Moore
Detailed information on each is provided on page 6. The By-laws provide
that a person cannot be elected or re-elected to the Board after the
person's 70/th/ birthday. Therefore, effective with this Annual Meeting,
Mr. Douglas R. Cummings, a Class B director, will no longer be eligible
to stand for re-election. On February 21, 2002, the Board of Directors
elected Ms. Pattye L. Moore as a Class B director, and nominated Messrs.
William M. Bell, John B. Dicus and David L. Kyle and Ms. Pattye L. Moore
as its nominees for election as Class B directors. It is contemplated
that at its meeting to be held April 18, 2002, the board will, by
resolution, reduce the size of the Board from 12 members to 11 members
due to Mr. Cummings' retirement as of the Annual Meeting. At that time
the Board will be divided into three Classes (A, B, and C) consisting of
3 members in Class A, 4 members in Class B and 4 members in Class C. Each
Class is elected for a term of three years, with the term of one class
expiring at each annual meeting of shareholders.
Your Board unanimously recommends a vote FOR each of these directors.
2. Ratify the appointment of KPMG LLP as principal independent auditor.
The Audit Committee has recommended, and the Board has approved, the
appointment of KPMG LLP ("KPMG") as our principal independent auditor for
the 2002 Fiscal Year subject to shareholder ratification. KPMG has
unrestricted access to the Audit Committee to discuss audit findings and
other financial matters. Representatives of KPMG will attend the annual
meeting to answer appropriate questions. They also may make a statement.
Audit services provided by KPMG during the 2001 Fiscal Year included an
audit of ONEOK's consolidated financial statements, audits of the
financial statements of certain ONEOK affiliates, and audits of employee
benefit plan financial statements. In addition, KPMG provided various
non-audit services to ONEOK during the 2001 Fiscal Year. See page 12 for
more details.
Required Approval -- Approval of this proposal requires the affirmative
vote of the holders of a majority of the shares of common stock present
in person or represented by proxy and entitled to vote at the meeting.
Your Board unanimously recommends a vote FOR the approval of KPMG's
appointment as independent auditor for 2002.
-5-
Nominees for the Board of Directors
Class B -- Term ending 2005
William M. Bell Director since 1981
Age 66
In January 2001, Mr. Bell retired as President and Director of Bank One, Oklahoma, N.A.
During the past forty years he has been involved in all facets of commercial banking, retail
banking, mortgage banking, and real estate finance and fiduciary services. Mr. Bell served as
[PHOTO] President, Chairman and CEO of Liberty National Bank and Trust Company (predecessor to
Bank One). On April 2, 2001, Mr. Bell joined BancFirst of Oklahoma City as Vice Chairman -
Trust and Investment Management.
John B. Dicus Director since 2001
Age 41
Mr. Dicus is President and Chief Operating Officer and a Director of Capitol Federal Savings
Bank and Capitol Federal Financial, where he has served in various officer positions since
1985. He also serves as a Director for Heartland Community Bankers Association, Amerus
[PHOTO] Annuity Group and Title Midwest, Inc. Mr. Dicus serves as Board Chairman for the United
Way of Greater Topeka and as a Trustee for the Washburn University Endowment Association.
David L. Kyle Director since 1995
Age 49
Mr. Kyle is the Chairman of the Board, President and Chief Executive Officer of ONEOK,
Inc. He was first employed by Oklahoma Natural Gas Company in 1974 as an engineer
trainee. He then served in a number of positions prior to being elected Vice President of Gas
Supply September 1, 1986, and Executive Vice President May 17, 1990. He was elected
[PHOTO] President of Oklahoma Natural Gas Company on September 1, 1994. He was elected
President of ONEOK Inc. effective September 1, 1997, and was elected Chairman of the
Board and appointed the Chief Executive Officer of ONEOK, Inc. August 28, 2000.
Pattye L. Moore Director since 2002
Age 44
[PHOTO] Ms. Moore is president - Sonic Corp. She joined Sonic in June of 1992 as vice president-
Marketing and was promoted to senior vice president-Marketing and Brand Development in
September 1995. Prior to joining Sonic, Ms. Moore spent eight years in account management
positions with Advertising Incorporated, a Tulsa - based advertising agency. She is active in
industry and community organizations such as the Arthritis Foundation where she is
currently chair of the national board of directors. Ms. Moore is also a member of the Board
of the Oklahoma Chapter of the Arthritis Foundation.
-6-
Continuing Directors
Class C -- Term ending 2003
Edwyna G. Anderson Director since 1995
Age 72
[PHOTO] Mrs. Anderson served as General Counsel of Duquesne Light Company from September
1988 until retirement in October 1994. She also served as Special Counsel to the President
of Duquesne Light Company from October 1994 until March 1995, when she retired from
that position.
William L. Ford Director since 1981
Age 59
[PHOTO]
Mr. Ford has served as President of Shawnee Milling Company since 1979. He serves, and
has served, on the boards of numerous civic and business organizations and not-for-profit
associations.
Bert H. Mackie Director since 1989
Age 59
[PHOTO] Mr. Mackie is the President and Director of the Security National Bank in Enid, Oklahoma,
where he served since 1962 in all facets of commerce banking. He is a licensed security
dealer and licensed to do business in real estate and insurance. Mr. Mackie serves as an
officer or director of many educational and business organizations, including the Treasurer
and Board of Trustees of the Oklahoma Foundation for Excellence.
Gary D. Parker Director since 1991
Age 56
[PHOTO]
Mr. Parker, a certified public accountant, is also the majority shareholder of Moffitt,
Parker & Company, Inc., and has been President of the firm since 1982. He is a director of
First Muskogee Financial Corp. of Muskogee, Oklahoma.
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Continuing Directors
Class A -- Term ending 2004
Douglas T. Lake Director since 1998
Age 51
Mr. Lake is the Executive Vice President and Chief Strategic Officer of Western Resources,
Inc. He joined Western Resources, Inc. in September 1998. Mr. Lake was with Bear
[PHOTO] Stearns & Co., Inc. from 1995 through 1998, where he last served as Senior Managing
Director of the Investment Banking Department. He was a Managing Director with Dillon
Read & Co., Inc. from 1991 through 1995. Mr. Lake is currently Chairman of the Board of
Protection One, Inc. and a director of Western Resources, Inc. and Guardian International,
Inc.
Douglas Ann Newsom, Ph.D. Director since 1982
Age 68
Dr. Newsom has been a Professor within the Department of Journalism at Texas Christian
University, Fort Worth, Texas, since 1969, and taught as an adjunct professor during 1968.
[PHOTO] Dr. Newsom is the director of the department's two graduate programs. In addition to her
teaching position, Dr. Newsom is a textbook author and public relations counselor.
Dr. Newsom serves as a Director of the Catholic Charities, Diocese of Ft. Worth.
J. D. Scott Director since 1979
Age 70
[PHOTO] Mr. Scott served as President, Chief Executive Officer and Chairman of the Board of ONEOK
Inc. from January 1987 until he retired in 1994.
-8-
Statement on corporate governance
The Corporate Governance Guidelines of the Board of Directors of ONEOK, Inc.
are intended to embody the principles by which the Board operates, and are not
intended to be a code of regulations, but rather a statement of intention. The
Guidelines were adopted by the Board in March of 1999. Key areas of the
Guidelines and principal functions of the Board are:
. Review succession planning and CEO performance evaluation;
. Review compensation and stock ownership of the Company's Directors
and executive officers; and
. Review the structure and operations of the Board.
The Board of Directors believes that corporate governance is a continuing
process and these Guidelines are reviewed periodically and may change from time
to time as conditions warrant.
Committee structure and membership roster
Committee structure: The Board has established the following standing
committees:
. The Audit Committee examines accounting processes and reporting
systems, assesses the adequacy of internal controls and risk management,
reviews and approves ONEOK's financial disclosures, and evaluates the
performance and recommends the appointment of independent auditors. The Audit
Committee has adopted, and operates under, a charter.
. The Executive Committee acts on behalf of the Board during intervals
between meetings of the Board and reports to the Board at its next regular
meeting on any actions taken. This committee has the power to act on major
matters where it deems action appropriate, providing a degree of flexibility
and ability to respond to time-sensitive business and legal matters without
calling a special Board meeting. It is ONEOK's practice to seek ratification by
the Board for the actions taken by the Executive Committee. The Executive
Committee has adopted, and operates under, a charter.
. The Executive Compensation Committee reviews ONEOK's executive
compensation programs to ensure the attraction, retention and appropriate
reward of executive officers, to motivate their performance in the achievement
of ONEOK's business objectives, and to align the interests of executive
officers with the long-term interests of ONEOK's shareholders. This Committee
reviews and makes recommendations to the Board on executive and director
compensation, personnel policies, programs and plans. The Executive
Compensation Committee has adopted, and operates under, a charter.
. The Nominating and Corporate Governance Committee ensures an
appropriate structure for management succession and development, and an
effective process for director selection and tenure by making recommendations
on the Board's organization and practices and by aiding in identifying and
recruiting director candidates. The Committee also establishes and reviews
issues of corporate governance. The Committee considers nominees recommended by
shareholders for service on the Board of Directors. Recommendations should be
sent to the Corporate Secretary at the address shown on the front of this Proxy
Statement. The Nominating and Corporate Governance Committee has adopted, and
operates under, a charter.
-9-
Committee membership roster as of March 18, 2002:
Executive Nominating and
Name Audit Compensation Corporate Governance Executive
---- ----- ------------ -------------------- ---------
E. G. Anderson M M
W. M. Bell M M
D. R. Cummings M M
J. B. Dicus M M
W. L. Ford C M
D. L. Kyle C
D. T. Lake M M
B. H. Mackie C M
P. L. Moore M M
D. A. Newsom M M
G. D. Parker C M
J. D. Scott M M
Number of 2 3 4 2
committee
meetings in Fiscal
Year 2001
C = Chairperson
M = Member
-10-
Report of the Audit Committee
The Board of Directors of ONEOK, Inc. (the "Company") adopted a written Audit
Committee Charter in April of 1999. All members of the Audit Committee are
independent as defined in Section 303.01(B)(2)(a) and (3) of the New York Stock
Exchange's listing standards.
The Audit Committee has reviewed and discussed with the Company's management
and KPMG LLP, the Company's independent auditors, the audited financial
statements of the Company contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 2001. The Audit Committee has also discussed
with the Company's independent auditors the matters required to be discussed
pursuant to SAS No. 61 (Codification of Statements on Auditing Standards,
Communication with Audit Committees).
The Audit Committee has received and reviewed the written disclosures letter
from KPMG LLP required by Independence Standards Board Standard No. 1 (titled,
"Independence Discussions with Audit Committees"), and has discussed with KPMG
LLP their independence. The Audit Committee has also considered whether the
provision of information technology services and other non-audit services to
the Company by KPMG LLP is compatible with maintaining their independence.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001, filed with the U.S. Securities and Exchange Commission.
Respectfully submitted by the members of the Audit Committee of the Board of
Directors:
/s/ Gary D. Parker, Chair /s/ William M. Bell, Vice Chair
/s/ Edwyna G. Anderson /s/ John B. Dicus
/s/ Douglas T. Lake /s/ J. D. Scott
-11-
Fees paid to independent auditor
Audit Fees -- KPMG LLP has billed the Company $916,000, in the aggregate, for
professional services rendered by KPMG LLP for the audit of the Company's
annual financial statements for the fiscal year ended December 31, 2001 and the
reviews of the interim financial statements included in the Company's Forms
10-Q filed during the fiscal year ended December 31, 2001.
Financial Information Systems Design and Implementation Fees -- No professional
services described in paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X were
rendered by KPMG LLP during the fiscal year ended December 31, 2001.
All Other Fees -- KPMG LLP has billed the Company $267,000, in the aggregate,
for services rendered by KPMG LLP for all services (other than those covered
above under "Audit Fees" and "Financial Information Systems Design and
Implementation Fees") during the fiscal year ended December 31, 2001. These
fees consisted of non-audit services of $47,000 and audit-related services of
$220,000. Non-audit services consisted of tax compliance services.
Audit-related services consisted primarily of audits of financial statements of
employee benefit plans, review of registration statements and issuance of
comfort letters and consents.
Audit Committee Consideration -- ONEOK's Audit Committee considered whether
KPMG LLP's provision of Financial Information Systems Design and Implementation
Fees and All Other Fees as reported above is compatible with maintaining KPMG
LLP's independence as ONEOK's principal independent accounting firm.
-12-
Directors' compensation
ONEOK annually benchmarks directors' compensation and strives to pay at the
median for companies of comparable size in its industry. A director who is an
officer or employee of ONEOK receives no compensation for his or her services
as a director or as a member of a committee of the Board. A director who is not
an officer or employee receives compensation for his or her services as
described below. All directors are reimbursed for reasonable expenses incurred
in connection with attendance at board and committee meetings.
During Fiscal 2001, eight meetings were held by the Board of Directors. All
directors attended at least seventy-five percent (75%) of the meetings of the
Board of Directors and committees on which such directors served.
The directors' compensation for Fiscal 2001 consisted of: 1) an annual cash
retainer of $22,500; 2) a stock retainer of 400 shares of ONEOK, Inc. common
stock on a post-split basis, the value of which is reflected in the total
directors' fees indicated below; 3) a stock option grant for 10,000 shares of
stock (post-split) granted under the ONEOK, Inc. Non-Employee Directors' Stock
Compensation Plan; and 4) meeting fees of $1,200 per board or committee meeting
attended in person or $600 per board or committee meeting attended via
telephone. Also, each committee chair receives an additional annual cash
retainer of $3,500. The total amount of directors' fees paid in Fiscal 2001 was
$492,311.
In Fiscal 2001, $242,205 of the total amount payable for directors' fees was
deferred under the Deferred Compensation Plan for Non-Employee Directors. All
non-employee directors are eligible to participate in this Plan. In January
each year the non-employee directors may elect to defer all, or a portion of,
the annual cash retainer, the annual stock retainer, and meeting fees payable
by ONEOK. Deferred amounts are treated, at the election of the participating
director, either as phantom stock or as a cash deferral.
Phantom stock deferrals will be treated as though the deferred amount is
invested in ONEOK common stock at the fair market value on the date the stock,
the retainer, and/or fees are earned. Phantom stock earns the equivalent of
dividends, reinvested at the fair market value on the payment date of each
common stock dividend declared. Phantom stock accounts are representative of
shares of common stock which can be issued to a non-employee director under the
ONEOK, Inc. Long-Term Incentive Plan, but are deferred until settlement in
shares of common stock at an elected deferral date. See pages 14-16 for phantom
stock ownership.
Cash deferrals will be credited with interest at the investment return rate
determined by the Executive Compensation Committee.
In January 2000, the Board created a special committee to review issues
relating to the now-terminated agreement to merge with Southwest Gas
Corporation. That committee was chaired by Gary D. Parker, and committee
members were paid the same fee for each meeting as standing committees
received; however, an additional $300 per hour, per director was paid for each
hour in excess of a four-hour meeting and for each hour spent on committee
business in addition to the four-hour meeting time. This committee met once
during 2001, and in total, $5,400 was paid to members of this Committee for
activities in fiscal year 2001.
Other Compensation for Non-Employee Directors. The Company provides business
travel accident insurance for non-employee directors. The policy provides
$100,000 death or dismemberment coverage to directors.
-13-
Directors' & officers'
ownership of ONEOK, Inc. stock
The following table shows how much ONEOK, Inc. common stock each director and
named executive officer owned as of December 31, 2001. No director or executive
officer beneficially owns more than 1% of the common stock, and at fiscal year
end directors and executive officers as a group beneficially owned
approximately 2.14% of the common stock.
Directors' & officers' stock ownership/1/
Directors' Total of shares of
Shares of deferred common stock
common compensation beneficially owned plus
stock plan Directors' deferred
Name and Address of beneficially phantom compensation plan
Beneficial Owner/2/ owned/3/ stock/4/ phantom stock
------------------- -------- -------- -------------
Edwyna G. Anderson 10,814 1,291 12,105
William M. Bell/5/ 16,035 6,760 22,795
Douglas R. Cummings 14,400 5,774 20,174
John B. Dicus 10,334 -- 10,334
Eugene N. Dubay 85,710 -- 85,710
William L. Ford/6/ 18,880 13,395 32,275
Howard R. Fricke/7/ 7,764 -- 7,764
John A. Gaberino, Jr./8/ 62,755 -- 62,755
John W. Gibson 24,461 -- 24,461
James C. Kneale/9,10/ 98,675 -- 98,675
David L. Kyle/10/ 272,932 -- 272,932
Douglas T. Lake 28,156 2,766 30,922
Bert H. Mackie 14,721 5,774 20,495
Pattye L. Moore/11/ -- 1,156 1,156
Douglas Ann Newsom 13,469 83 13,552
Gary D. Parker/12/ 19,631 2,282 21,913
J. D. Scott 273,961 -- 273,961
All directors and executive
officers as a group including
those named above 1,241,691 39,281 1,280,972
-14-
Notes to stock ownership table:
/1/ All holdings of ONEOK, Inc. Common Stock and Phantom Stock reflect the
impact of the two-for-one stock split approved by shareholders on May
17, 2001, and effective June 11, 2001.
/2/ All of ONEOK's directors and named executive officers may be contacted
at ONEOK, Inc., 100 West Fifth Street, Tulsa, OK 74103-4298.
/3/ This column includes ONEOK, Inc. stock held by directors and officers,
or by members of their families for which the directors and officers
have sole or shared voting or investment power, shares of common stock
they hold in the ONEOK, Inc. Direct Stock Purchase and Dividend
Reinvestment Plan, and ONEOK, Inc. securities directors and officers
have the right to acquire within 60 days of December 31, 2001. The
following table sets forth the amounts and types of stock held,
including shares of ONEOK, Inc. common stock:
. Which the following persons have the right to acquire as a result of
the exercise of stock options within 60 days after December 31, 2001
under the ONEOK, Inc. Long-Term Incentive Plan or the Stock
Compensation Plan for Non-Employee Directors;
. In the custody of the Trustee for the Thrift Plan for Employees of
ONEOK, Inc. and Subsidiaries as of December 31, 2001; and
. Which were granted under the ONEOK, Inc. Long-Term Incentive Plan as
restricted stock on October 21, 1999, May 15, 2000, or January 18,
2001. These shares are restricted and vest in full after a three-year
period from the date of grant. The named individuals have voting
rights for these shares and these shares earn dividends.
Stock Options Stock
Exercisable Held by the
Executive Officer/Director within 60 Days Thrift Plan Restricted Stock
Edwyna G. Anderson 10,000 0 0
William M. Bell 10,000 0 0
Douglas R. Cummings 10,000 0 0
John B. Dicus 10,000 0 0
Eugene N. Dubay 48,250 13,096 10,756
William L. Ford 10,000 0 0
Howard R. Fricke 0 0 0
John A. Gaberino, Jr. 24,900 21,530 12,821
John W. Gibson 12,000 0 12,457
James C. Kneale 44,780 28,695 12,603
David L. Kyle 122,732 62,666 56,759
Douglas T. Lake 10,000 0 0
Bert H. Mackie 10,000 0 0
Pattye L. Moore 0 0 0
Douglas Ann Newsom 10,000 0 0
Gary D. Parker 10,000 0 0
J. D. Scott 10,000 167,051 0
All directors and executive officers
as a group (including those named
above): 459,666 401,316 140,575
/4/ Phantom stock has a value equal to shares of common stock, but phantom
stock has no voting rights or other shareholder rights. See Director's
Compensation on page 13 for further information concerning the Deferred
Compensation Plan for Non-Employee Directors. Phantom stock suffers all
the risks, and enjoys all the rewards, of changes in the price of common
stock.
/5/ Includes 1,467 shares held in the Bell Family 1982 Revocable Trust.
/6/ Includes 2,469 shares owned by the 1979 Leslie A. Ford Trust, of which
William L. Ford is a trustee. Mr. Ford disclaims beneficial ownership of
these shares.
/7/ Mr. Fricke resigned from the Board on February 14, 2001. On that date
Mr. Fricke had accumulated 3,882 shares of Phantom Stock under the
ONEOK, Inc. Deferred Compensation Plan for Non-Employee Directors. The
3,882 shares of Phantom Stock were converted to common stock holdings
upon Mr. Fricke's resignation.
-15-
/8/ Includes 234 shares held by Mrs. John A. Gaberino, Jr. Mr. Gaberino
disclaims beneficial ownership of these shares.
/9/ Includes 8,259 shares held by Mrs. James C. Kneale and 480 shares held
by Mr. Kneale's daughter. Mr. Kneale disclaims beneficial ownership of
these shares.
/10/ ONEOK Texas Resources, Inc. owns approximately 11.3% of Magnum Hunter
Resources, Inc. Due to Magnum Hunter's merger with Prize Energy Corp.,
which was completed on March 15, 2002, ONEOK Texas Resources, Inc.'s
ownership was reduced from approximately 22.0% to approximately 11.3%
with one director represented on the Board. The table below reflects
stock beneficially owned and options exercisable within 60 days of
December 31, 2001, by Messrs. Kyle and Kneale as officers of ONEOK
serving as directors of Magnum Hunter. Each owned less than 1% of Magnum
Hunter Resources, Inc. common stock outstanding at fiscal year end.
Total Shares of
Shares of Magnum Hunter Magnum Hunter
Magnum Hunter Options Exercisable Beneficially Owned
Name and Address of common stock within 60 Days of or Exercisable
Beneficial Owner beneficially owned December 31, 2001 within 60 Days
Mr. Kyle
100 West Fifth Street
Tulsa, OK 74103-4298 24,000 36,000 60,000
Mr. Kneale
100 West Fifth Street
Tulsa, OK 74103-4298 1,000 9,000 10,000
/11/ Although the information provided in this table reflects ownership as of
December 31, 2001, Ms. Moore was not a member of the Board until her
election by the Board effective February 21, 2002. Upon her election she
received a pro-rata portion of the annual cash retainer, a pro-rata
portion of the annual stock retainer, and a stock option grant for
10,000 shares of ONEOK, Inc. common stock, which will vest in full one
year from the date of grant. Ms. Moore elected to defer a portion of the
cash retainer and all of the stock retainer to phantom stock as
reflected in the table on Page 14.
/12/ Includes 940 shares held by Mrs. Gary D. Parker. In addition, Mr. Parker
holds 2,800 shares in trust as the Trustee of the Phillip Wilkinson
Irrevocable Trust under agreement dated 07/13/95.
-16-
Executive compensation:
Report of the Compensation Committee
The Committee's Responsibilities: The Executive Compensation Committee of the
Board ("the Committee") has responsibility for reviewing, and recommending to
the full Board of Directors, the Company's executive compensation programs to:
.. attract, retain and appropriately reward executive officers;
.. motivate their performance in the achievement of the Company's business
objectives; and
.. align the interests of executive officers with the long-term interests of
the Company's shareholders.
The Committee is composed entirely of outside directors. The purpose of this
report is to summarize the philosophical principles, specific program
objectives, and other factors considered by the Committee in reaching its
recommendations regarding the executive compensation of the Named Executive
Officers.
Compensation Philosophy: The Company's executive compensation program is based
on the belief that the interests of executives should be closely aligned with
those of the shareholders. The Committee has adopted a framework of principles
for the management compensation program which:
.. attracts the best talent to ONEOK;
.. encourages executives to manage from the perspective of owners with an
equity stake in the Company;
.. motivates individuals to perform at their highest levels;
.. encourages strong financial and operational performance of the Company and
creates shareholder value by maintaining a portion of executives' total
compensation at risk;
.. rewards outstanding achievement; and
.. retains the leadership and skills necessary for building long-term
shareholder value.
Compensation Methodology: ONEOK strives to provide a comprehensive executive
compensation program that is competitive and performance-based in order to
attract and retain superior executive talent. Annually, the Committee reviews
market data for two components of executive compensation: (1) annual cash
compensation, and (2) long-term incentive compensation. To assist in
benchmarking the competitiveness of its compensation programs, ONEOK
participates in executive compensation surveys and utilizes independent
compensation consultants. Because the Committee believes that the Company's
direct competition for executive talent is broader than the companies that are
included in the S&P Utilities Index which is used in the Performance Graph on
page 21, the surveys utilized include the American Gas Association Executive
Compensation Survey, the Effective Compensation Oil and Gas Industry
Compensation Survey, the Hewitt Associates Energy Traders Compensation Survey,
the Towers Perrin Compensation Survey of Energy Marketing and Trader Positions,
the Watson Wyatt Worldwide Top Management Compensation Survey, and the William
M. Mercer Finance Accounting and Legal Survey.
Components of Compensation:
.. Annual Cash Compensation: Annual cash compensation for the Named Executive
Officers, as well as all executive officers, consists of two components,
base salary and a variable, at-risk incentive.
Annual base salary is designed to compensate executives for their level of
responsibility, experience, sustained individual performance, and
contribution to the Company. The Committee recommends to the Board all
salary increases for executive officers. The goal is to compensate
executives at 100% of the competitive base salary levels for similar
positions by ONEOK's peers as identified through published surveys, company
documents, and other sources.
Annual incentive awards are issued under the ONEOK, Inc. Annual Officer
Incentive Plan (the "Officer Incentive Plan"). The purpose of the Officer
Incentive Plan is to provide certain officers of ONEOK, Inc. with a direct
financial interest in the performance and profitability of the Company and
to reward performance. The Officer Incentive Plan is administered by the
Committee in accordance with stated purposes and the Committee recommends
to the full Board of Directors, based on recommendations of the CEO, all
awards under the Officer Incentive Plan.
-17-
The Officer Incentive Plan is designed to allow the Company's officers the
opportunity to earn compensation that is above average when compared to
ONEOK's peers if ONEOK achieves outstanding results compared to those peers
and to targeted objectives.
Incentive criteria are established by the Committee and include achievement
of certain corporate and unit performance goals as well as individual
performance criteria as benchmarks for Incentive Awards. Such criteria
include earnings per share, shareholder appreciation, and return on
invested capital.
Individual performance criteria includes:
. problem analysis; . planning and organizational ability;
. directing; . decision-making;
. utilization of human, capital & material . resoutricmees;management;
. initiation of, and response to, change; . communication and team relations; and
. personal actions.
The Bonus column of the Summary Compensation Table on page 22 contains the
annual incentives earned for Fiscal 2001 for each of the Named Executive
Officers.
.. Long-term Incentive Compensation: On August 20, 1998, the Committee
recommended to the full Board that it amend and restate the Key Employee
Stock Plan. The amendments included changing the name to the ONEOK, Inc.
Long-Term Incentive Plan (the "LTI Plan"), increasing the number of shares
subject to the LTI Plan, modifying the definition of certain terms
governing the granting of stock incentives, and providing for payment of
non-employee director compensation in the form of stock awards. The
shareholders approved that amendment to the LTI Plan on January 21, 1999.
On February 15, 2001, the Committee recommended to the full Board that it
amend and restate the Plan to increase the shares available for issuance.
That amended and restated Plan was approved by the shareholders on May 17,
2001, and will remain in effect until all shares authorized to be issued
as stock incentives have been granted or until the Board terminates the
LTI Plan. Also on May 17, 2001, the shareholders approved a two-for-one
stock split, effective June 11, 2001, which had the effect of doubling the
number of shares available for issuance from the Plan and the outstanding
options granted.
The purpose of the LTI Plan is to provide incentives to enable the Company
to attract, retain, and reward certain employees and to give such employees
an interest parallel to the interests of the Company's shareholders. The
LTI Plan is administered by the Committee, and the Committee reviews and
recommends to the full Board of Directors, after recommendation of the CEO,
all long-term incentive awards. The Committee is authorized to make all
decisions and interpretations required to administer and execute the LTI
Plan. Participation in the LTI Plan is limited to certain employees of
ONEOK, Inc. who are in a position to contribute significantly to the growth
and profitability of the Company, its divisions, and subsidiaries.
The LTI Plan authorizes the Committee to grant stock incentives to eligible
employees in a variety of forms including: (1) Incentive Stock Options, (2)
Non-Statutory Stock Options, (3) Restricted Stock Awards, and
(4) Performance Awards. In 1995, 1996, 1997 and 1998, these awards were
granted as non-statutory stock options. From 1999 forward these awards were
granted as non-statutory stock options and/or restricted stock. In
determining the number of stock options and/or restricted stock awarded,
the Committee reviewed a survey detailing the 50/th/ percentile of grant
values of long-term incentives in the general industry, and it also
considered the participant's past performance. The table below details the
grants that have been made from the LTI Plan and the balance remaining
available for grant as of December 31, 2001:
-18-
# OF
DATE EMPLOYEES # OF SHARES* FIRST DATE EXERCISABLE EXPIRATION DATE
---- --------- ------------ ---------------------- ---------------
11/16/95 57 214,800 11/16/96 11/16/05
10/10/96 63 201,400 10/10/97 10/10/06
10/16/97 82 398,000 10/16/98 10/16/07
01/16/98 37 90,400 01/16/99 01/16/08
10/15/98 143 568,200 10/15/99 10/15/08
10/21/99
Stock Options 142 617,400 10/21/00 10/21/09
10/21/99
Restricted stock 44 132,600 10/21/02 Not Applicable **
05/15/00***
Stock Options 1 8,000 05/15/01 05/15/10
05/15/00***
Restricted Stock 1 4,000 05/15/03 Not Applicable **
01/18/01
Stock Options 210 992,000 01/18/02 01/18/11
01/18/01
Restricted Stock 28 90,400 01/18/04 Not Applicable **
Total Remaining Available for Grant as of 12/31/01: 4,570,503
* The number of shares listed for grants made through 01/18/01 reflect
the impact of the 06/11/01 two-for-one stock split.
** Restricted stock does not have an expiration date. These shares are
restricted and vest in full after a three-year period from the date of
grant. The holders of restricted stock have voting rights for these
shares and the shares earn dividends.
*** This out-of-cycle grant was made to Mr. John W. Gibson upon his
employment with ONEOK.
Due to the transition to a December 31/st/ fiscal year end, no options
or restricted stock were granted in Fiscal 2000 other than the grant
detailed above for Mr. Gibson.
Stock Options have an exercise price equal to the fair market value of
common stock on the date of grant. The options granted in 1995, 1996,
1997, and in January of 1998 are exercisable beginning one year from
the date of grant. In 1998 the Committee modified the Non-Statutory
Stock Option Agreement to allow stock options granted under that
Agreement to become exercisable beginning one year after the date of
grant in four equal annual installments.
Stock Options may include a restoration feature, by which options are
granted to replace shares that are surrendered by participants as full
or partial payment to the Company of the purchase price of shares
being acquired through the exercise of the stock option or shares that
are surrendered to satisfy the tax obligations incident to the
exercise of an option. Each restored option shall have an option price
equal to the fair market value of the Common Stock on the date of
grant of the restored option and shall expire on the stated expiration
date of the original option.
The LTI Plan does not allow for the repricing of stock options.
-19-
Chief Executive Officer Compensation: This Committee meets annually to review
the Board of Directors' evaluation of the Chief Executive Officer's ("CEO")
performance. The Committee uses this performance evaluation, the surveys
previously mentioned, and the C.A. Turner Utility Report on financial and stock
performance in considering the CEO's compensation. When reviewing the surveys
and financial data, the Committee factors in that ONEOK's CEO also serves the
Company as Chairman of the Board. Categories in which performance is evaluated
include: (1) leadership, (2) strategic planning, (3) financial issues, (4)
management and operations, (5) human resources, and (6) communications.
. Annual Cash Compensation: The Committee recommended, and the Board of
Directors approved, a base salary amount of $700,000. Mr. Kyle received
a retroactive salary increase of $82,531, which was earned in Fiscal
2000 but paid in Fiscal 2001.
Annual incentive compensation for Mr. Kyle is based on attainment of
annual performance goals for the Company, and on Mr. Kyle's individual
objectives and performance as reviewed by the Committee. Based on these
criteria, Mr. Kyle was awarded $0.00 representing 0% of his
compensation that related to the Company's performance during the 2001
fiscal year.
. Long-term Incentive Compensation: On January 18, 2001, Mr. Kyle
received a non-statutory stock option grant of 40,000 shares of stock
at a purchase price of $44.6250 per share. This grant will become first
exercisable on January 18, 2002, as to 10,000 shares, and the remaining
portion of the grant will vest equally over the next three years. Also,
on January 18, 2001, Mr. Kyle was granted 17,600 shares of restricted
stock that will vest in full on January 18, 2004.
The grants made to Mr. Kyle on January 18, 2001 (and all grants issued to
employees from the ONEOK, Inc. Long-Term Incentive Plan) were impacted by
the 2-for-1 stock split approved by shareholders at the May 17, 2001,
Annual Meeting and effective June 11, 2001. After the split, the 01/18/01
grant for Mr. Kyle resulted in a non-statutory stock option for 80,000
shares of stock at a purchase price of $22.3125, and a restricted stock
award for 35,200 shares of stock.
Internal Revenue Service Limitations on Deductibility of Executive
Compensation: In structuring the Company's compensation plans, the Committee
takes into consideration Section 162(m) of the Internal Revenue Code (which
disallows the deduction of compensation in excess of $1,000,000 except for
certain payments based upon performance goals) and other factors the Committee
deems appropriate. As a result, some of the compensation under the Company's
compensation plans may not be deductible under Section 162(m).
Compensation Committee Interlock and Insider Participation: There are none.
Respectfully submitted by the members of the Executive Compensation Committee
of the Board of Directors:
/s/ William L. Ford, Chair /s/ Douglas R. Cummings, Vice Chair
/s/ William M. Bell /s/ John B. Dicus
/s/ Douglas T. Lake /s/ Douglas Ann Newsom
-20-
Stock performance graph
Comparison of 64 month cumulative total return*
Among ONEOK, Inc., the S&P 500 Index
And the S&P Utilities Index
[CHART]
* $100 Invested on 8/31/96 in stock or index-including reinvestment of
dividends.
1996 1997 1998 1999 2000 2001
---------------------------------------------------------------------
[_] ONEOK, Inc. 100.00 123.10 118.21 127.11 207.77 156.60
---------------------------------------------------------------------
/\ S&P 500 Index 100.00 140.65 152.03 212.58 215.89 190.23
---------------------------------------------------------------------
. S&P Utilities Index 100.00 110.71 138.60 155.91 224.18 155.97
Notes to stock performance graph:
1 The S&P Utilities Index is comprised of the following: AES Corp.;
Allegheny Energy Inc.; Ameren Corp.; American Electric Power; Calpine
Corp; CINergy Corp.; CMS Energy; Consolidated Edison Holdings;
Constellation Energy Group; Dominion Resources; DTE Energy Co.; Duke
Energy; Dynegy Inc.; Edison International; El Paso Corp; Entergy Corp.;
Exelon Corp.; FPL Group; FirstEnergy Corp.; KeySpan Corp.; Kinder Morgan,
Inc.; Mirant Corporation; Niagara Mohawk Holdings Inc.; NICOR Inc.;
NiSource Inc.; Peoples Energy; PG&E Corp.; Pinnacle West Capital; PPL
Corporation; Progress Energy, Inc.; Public Service Enterprise Inc.;
Reliant Energy; Sempra Energy; Southern Co.; TXU Corp.; Williams Cos.;
and Xcel Energy Inc.
2 Assuming that the value of the investment in ONEOK common stock and each
index was $100 on August 31, 1996, and that all dividends were
reinvested, this graph compares ONEOK's cumulative total return (i.e.,
based on common stock price and dividends), plotted on an annual basis,
with the S&P 500 Stock Index, a performance indicator of the overall
stock market and the S&P Utilities Index.
3 The information provided in this Performance Graph and in the Executive
Compensation Report of the Compensation Committee on Pages 17-20 should
not be considered soliciting material. Also, it should not be considered
to be filed with the Securities and Exchange Commission or to be subject
to Regulations 14A or 14C, other than as provided in Item 402 of
Regulation S-K, or to the liabilities of Section 18 of the Securities
Exchange Act of 1934. Unless specific reference is made to such sections
in a filing, the information should not be incorporated by reference into
any such filing under the Securities Act of 1933 or the Securities Act of
1934. Also, the stock performance as shown on the Performance Graph
should not be interpreted as a prediction of future stock performance.
-21-
Executive compensation, pension plans & other arrangements
Summary compensation table/1/
Annual Compensation Long-term Compensation
--------------------------------- -----------------------------
Securities
Restricted underlying
Other annual stock Options/ LTIP All other
Name & principal Salary Bonus compensation award(s)/3/ SARs/4/ Payouts Compensation/5/
position Year/2/ ($) ($) ($) ($) # ($) ($)
----------------------------------------------------------------------------------------------------------------
D. L. Kyle/6/ FY 2001 $723,000/7/ $ 0 None $785,400 80,000 None $108,941
Chairman of the FY 2000 585,267/8/ 645,000 None None 23,430/9/ None 47,097
Board, President and SY 1999 118,667 0 None 274,069 35,600 None 11,400
Chief Executive Officer FY 1999 354,669 114,500 None None 42,000 None 29,767
J. C. Kneale/6/ FY 2001 $293,500/7/ $ 0 None $178,500 40,000 None $ 52,476
Senior Vice President, FY 2000 242,500 255,000 None None 9,606/9/ None 28,583
Treasurer, and Chief SY 1999 80,000 0 None 58,313 16,000 None 11,802
Financial Officer FY 1999 216,676 48,100 None None 13,000 None 24,648
J. W. Gibson FY 2001 $ 276,000 $ 0 None $178,500 40,000 None $ 29,188
President - Energy FY 2000 157,217 180,000 None 52,625 8,000 None 65,266
SY 1999 -- -- None -- -- None --
FY 1999 -- -- None -- -- None --
J. A. Gaberino, Jr. FY 2001 $ 250,000 $ 0 None $ 89,250 25,000 None $ 47,275
Senior Vice President, FY 2000 240,000 205,000 None None None None 26,748
General Counsel, and SY 1999 80,000 0 None 116,625 16,000 None 11,625
Corporate Secretary FY 1999 235,000 38,500 None None 14,200 None 23,478
E. N. Dubay FY 2001 $ 250,000 $ 0 None $ 44,625 25,000 None $ 45,060
President - Kansas FY 2000 250,000 185,000 None None None None 27,348
Gas Service Company SY 1999 83,333 0 None 116,625 16,000 None 9,076
FY 1999 234,667 48,100 None None 24,000 None 25,138
/1/ The restricted stock award values and securities underlying options/SARs
reflect the impact of the shareholder approved two-for-one stock split
effective June 11, 2001.
/2/ In 1999 the Company changed its fiscal year end from August 31/st/ to
December 31/st/. The period shown as SY1999 refers to the four (4) months
ending December 31, 1999. The period identified as FY1999 refers to the
fiscal year ended August 31/st/. Therefore, compensation data is presented
for Fiscal 2001 (ending December 31, 2001), Fiscal 2000 (ending December
31, 2000), the four-month transition period ended December 31, 1999, and
Fiscal 1999 (ending August 31, 1999).
/3/ Restricted stock was granted under the ONEOK, Inc. Long-Term Incentive
Plan on January 18, 2001. These shares are restricted for a period of
three years. During the "vesting" period, dividends are paid to
participants on a non-preferential basis, and are reinvested in additional
shares of restricted stock. The values reflected above represent the
post-split number of shares granted times the post-split grant price of
$22.3125. Dividends accrued throughout the year and the year-end value of
these restricted shares are also indicated below:
Post-Split Dividends Total # of shares Closing Price of a
# of Shares Accrued in 2001 Held at 12/31/01 Share of Unrestricted Value as of
Granted Reflects 2-for-1 Split Reflects 2-for-1 Split Stock as of 12/31/01 12/31/01
----------- ---------------------- ---------------------- --------------------- -----------
D. L. Kyle 35,200 1,132 36,332 $17.84 $648,162.88
J. C. Kneale 8,000 257 8,257 $17.84 $147,304.88
J. W. Gibson 8,000 257 8,257 $17.84 $147,304.88
J. A. Gaberino, Jr. 4,000 128 4,128 $17.84 $ 73,643.52
E. N. Dubay 2,000 64 2,064 $17.84 $ 36,821.76
/4/ No Stock Appreciation Rights ("SARs") were granted in Fiscal 2001 to any
of the named executive officers.
/5/ All other compensation includes amounts paid as (1) the Company's match to
the Non-Qualified Deferred Compensation Plan; (2) vehicle allowances; (3)
the Company's match to the Thrift Plan for Employees of ONEOK, Inc. and
Subsidiaries; (4) private use of the company plane; (5) stock awards; and
(6) service awards. The respective amounts paid in 2001 were $70,500,
$24,000, $10,200, $4,093, $148, and $0 for Mr. Kyle; $21,975, $18,000,
$10,200, $1,369, $148, and $784 for Mr. Kneale; $840, $18,000, $10,200,
$0, $148, and $0 for Mr. Gibson; $17,725, $18,000, $10,200, $1,202, $148,
and $0 for Mr. Gaberino; and $16,525, $18,000, $10,200, $0, $144, and $191
for Mr. Dubay.
-22-
/6/ ONEOK Texas Resources, Inc., an affiliate of ONEOK, Inc. currently owns
approximately 11.3% of Magnum Hunter Resources, Inc. Due to Magnum
Hunter's merger with Prize Energy Corp., which was completed March 15,
2002, ONEOK Texas Resources, Inc.'s ownership was reduced from
approximately 22.0% to approximately 11.3% with one director represented
on the Board. During Fiscal 2001 Messrs. Kyle and Kneale served on the
Board of Magnum Hunter. The information listed in the table below reflects
options granted to them as officers of ONEOK serving as Directors of
Magnum Hunter. The options granted in SY 1999, FY 2000, and FY 2001 were
granted at exercise prices of $2.50, $7.9375, and $8.44 respectively and
vested 20% on the date of grant and 20% annually thereafter until fully
vested. These options have a 10-year term. The option granted to Mr. Kyle
in FY 1999 was granted upon his election to the Board and vested in full
upon the date of grant. This option was granted at an exercise price of
$5.25 and has a 10-year term.
Magnum Hunter
Name & principal position Year Stock Options
------------------------- ------- -------------
D. L. Kyle FY 2001 15,000
Chairman of the Board, President, FY 2000 15,000
and Chief Executive Officer SY 1999 10,000
FY 1999 25,000
J. C. Kneale FY 2001 15,000
Senior Vice President, Treasurer, FY 2000 15,000
and Chief Financial Officer SY 1999 --
FY 1999 --
/7/ These items include fees paid to Messrs. Kyle and Kneale as officers of
ONEOK for serving on the Board of Directors of Magnum Hunter Resources,
Inc. The table below shows the dollar amounts included for Fiscal 2001:
FY2001
-------
D. L. Kyle $23,000
J. C. Kneale $23,500
/8/ Includes a retroactive salary adjustment earned for Fiscal 2000 paid in
Fiscal 2001.
/9/ A portion of the securities underlying these grants are restored or
"reloaded" options. The stock option agreements provide that an additional
option may be granted if, and when, the optionee exercises all or part of
the option using common stock to pay the purchase price of the option or
to satisfy tax obligations incident to the exercise of the option. The
restored option will be exercisable for the number of shares tendered to
pay the option price or to satisfy any tax obligation, and will be
exercisable at any time after the expiration of a period of six (6) months
following the date of grant (or at any other time as determined by ONEOK)
and will expire on the expiration date of the original grant. The number
of restored options included in these grants (post-split) are as follows:
D. L. Kyle Grants for FY 2000 include:
17,320 shares at an exercise price of $21.2350 Expires 10-16-07
6,110 shares at an exercise price of $21.2350 Expires 10-21-09
J. C. Kneale Grants for FY 2000 include:
9,606 shares at an exercise price of $21.0950 Expires 10-16-07
-23-
Option/SAR grant table
The following table represents additional information concerning the option
awards shown in the Summary compensation table for Fiscal Year 2001. The
options to purchase ONEOK common stock were granted to the Named Executive
Officers under the ONEOK, Inc. Long-Term Incentive Plan.
Option/SAR grants in Fiscal Year 2001 ending 12/31/01/1/
Individual grants
---------------------------------------------------------------------- Potential realizable value
Securities at assumed annual rates
underlying Percent of of stock price
Options total options Exercise appreciation for option
granted/2/ granted to or base term/3/
-------------- employees price Expiration --------------------------
Name Date Number in fiscal year ($/share) date 5% 10%
---- ------- ------ -------------- --------- ---------- ---------- ----------
D. L. Kyle/4/ FY 2001 80,000 7.24% $22.31 01/18/11 $1,122,451 $2,844,512
J. C. Kneale/4/ FY 2001 40,000 3.62% $22.31 01/18/11 $ 561,226 $1,422,256
J. W. Gibson FY 2001 40,000 3.62% $22.31 01/18/11 $ 561,226 $1,422,256
J. A. Gaberino, Jr. FY 2001 25,000 2.26% $22.31 01/18/11 $ 350,766 $ 888,910
E. N. Dubay FY 2001 25,000 2.26% $22.31 01/18/11 $ 350,766 $ 888,910
Notes to option grant table:
/1/ No Stock Appreciation Rights ("SARs") were granted in Fiscal 2001.
/2/ All option grants itemized reflect the impact of the shareholder approved
two-for-one stock split effective June 11, 2001.
ONEOK, Inc. options are granted at the Fair Market Value of ONEOK stock on
the date of grant. The options vest in four-equal annual installments,
commencing one year from the date of grant. Each option has a 10-year term.
Although no restored options were granted to the Named Executive Officers
during Fiscal 2001, the stock option agreements provide that an additional
option may be granted if, and when, the optionee exercises all or part of
an option using common stock to pay the purchase price of the option or to
satisfy tax obligations incident to the exercise of the option. The
restored option will be exercisable for the number of shares tendered to
pay the option price or to satisfy any tax obligation, and will be
exercisable at any time after the expiration of a period of six (6) months
following the date of grant (or at any other time as determined by ONEOK)
and will expire on the expiration date of the original grant. Each restored
option is awarded with an exercise price equal to the fair market value of
a share of ONEOK, Inc., common stock on the date of the grant.
/3/ These amounts represent assumed rates of appreciation only and are not
intended to forecast future appreciation of the common stock price. Actual
gains, if any, on stock option exercises depend on the future performance
of the common stock and overall market conditions. There can be no
assurances that the potential values reflected in this table will be
achieved.
/4/ Currently ONEOK Texas Resources, Inc. owns approximately 11.3% of Magnum
Hunter Resources, Inc. Due to Magnum Hunter's merger with Prize Energy
Corp., which was completed on March 15, 2002, ONEOK Texas Resources,
Inc.'s ownership was reduced from approximately 22.0% to approximately
11.3% with one director represented on the Board. The table below reflects
the options granted to Messrs. Kyle and Kneale as officers of ONEOK
serving as Directors of Magnum Hunter. The options granted in Fiscal Year
2001 were granted on 12/12/01 at an exercise price of $8.44. These options
have a 10-year term and vest 20% on the date of grant and 20% annually
thereafter until fully vested.
Individual grants
---------------------------------------------------------------- Potential realizable
Securities value at assumed
underlying Percent of annual rates of stock
options total options Exercise price appreciation for
granted/2/ granted to or base option term/3/
-------------- employees price Expiration ----------------------
Name Date Number in fiscal year ($/share) date 5% 10%
---- ------- ------ -------------- --------- ----------- ------- --------
D. L. Kyle FY 2001 15,000 0.97% $8.44 06/16/02/5/ $79,631 $201,800
J. C. Kneale FY 2001 15,000 0.97% $8.44 12/12/11 $79,631 $201,800
/5/ The original expiration date of this option was December 12, 2011.
However, due to Mr. Kyle's resignation from the Magnum Hunter Board in
connection with Magnum Hunter's merger with Prize Energy Corp., the
expiration date became June 16, 2002.
-24-
Aggregated option/SAR exercises and year-end values
The following table shows information for the Named Executive Officers,
concerning:
. exercises of stock options and SARs/1 during Fiscal 2001; and /
. the amount and values of unexercised stock options and SARs as of
December 31, 2001.
Aggregated options/SAR exercises in 2001 and year-end option/SAR values
Shares
acquired Number of securities Value of unexercised in-the-
on Value underlying unexercised money options at fiscal
exercise realized options at fiscal year end (#) year end ($)/2/
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
D. L. Kyle/3/ 0 $ 0 102,732 108,300 $50,103 $57,085
J. C. Kneale/3/ 0 $ 0 34,780 51,250 $30,046 $25,494
J. W. Gibson 0 $ 0 2,000 46,000 $ 9,127 $27,382
J. A. Gaberino, Jr. 0 $ 0 18,650 36,550 $26,312 $25,527
E. N. Dubay 4,000 $26,080 42,000 39,000 $44,894 $25,798
/1/ No Stock Appreciation Rights ("SARs") were granted in Fiscal 2001.
/2/ Based on per share price for ONEOK, Inc. common stock at fiscal year end
(FY 2001) of $17.72 per share. The price reflects the average of the high
and low trading price on the New York Stock Exchange on December 31, 2001.
/3/ Currently ONEOK Texas Resources, Inc. owns approximately 11.3% of Magnum
Hunter Resources, Inc. Due to Magnum Hunter's merger with Prize Energy
Corp., which was completed on March 15, 2002, ONEOK Texas Resources,
Inc.'s ownership was reduced from approximately 22.0% to approximately
11.3% with one director represented on the Board.
The table below reflects option exercises and options underlying
unexercised options at fiscal year end by Messrs. Kyle and Kneale as
officers of ONEOK serving as Directors of Magnum Hunter.
Shares
acquired Number of securities Value of unexercised in-the-
on Value underlying unexercised money options at fiscal
exercise realized options at fiscal year end (#) year end ($)/4/
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
D. L. Kyle 4,000 $37,252 36,000 25,000 $90,025 $26,463
J. C. Kneale 0 $ 0 9,000 21,000 $ 2,175 $ 3,263
/4/ Based on a per share closing price of Magnum Hunter Resources, Inc.
common stock of $8.30 on December 31, 2001.
-25-
Pension plans
This table shows the estimated annual retirement benefits payable to a plan
participant based upon the final average pay formulas of the Retirement Plan
for Employees of ONEOK, Inc. and Subsidiaries/1/. The estimates assume that
benefits are received in the form of a single life annuity.
Pension Plan Table
Estimated annual benefits under final average earnings /2 3 4 5/
----------------------------------------------------------------
Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years
------------ -------- -------- -------- -------- --------
$125,000 $ 33,604 $ 44,806 $ 56,007 $ 67,208 $ 78,410
$150,000 $ 40,917 $ 54,556 $ 68,195 $ 81,833 $ 95,472
$175,000 $ 48,229 $ 64,306 $ 80,382 $ 96,458 $112,535
$200,000 $ 55,542 $ 74,056 $ 92,570 $111,083 $129,597
$225,000 $ 62,854 $ 83,806 $104,757 $125,708 $146,660
$250,000 $ 70,167 $ 93,556 $116,945 $140,333 $163,722
$300,000 $ 84,792 $113,056 $141,320 $169,583 $197,847
$400,000 $114,042 $152,056 $190,070 $228,083 $266,097
$450,000 $128,667 $171,556 $214,445 $257,333 $300,222
$500,000 $143,292 $191,056 $238,820 $286,583 $334,347
Notes to the pension benefits table:
/1/ The Retirement Plan for Employees of ONEOK, Inc. and Subsidiaries is a
tax-qualified, defined-benefit pension plan under both the Internal
Revenue Code of 1986, as amended, and the Employee Retirement Income
Security Act of 1974, as amended. Benefits become vested and
non-forfeitable after completion of five years of continuous employment.
A vested participant receives the retirement benefit at retirement age
under the Retirement Plan, unless an early retirement benefit is elected
under the Plan, in which case the retirement benefit is actuarially
reduced for early commencement. Benefits are calculated at retirement
date based on a participant's credited service, limited to a maximum of
35 years, and final average earnings. Credited years of service under
these plans for the Named Executive Officers as of December 31, 2001 are
as follows: D. L. Kyle, 27 years and 6 months; J. C. Kneale, 20 years
and 8 months; J. W. Gibson, 1 year and 7 months; J. A. Gaberino, Jr., 3
years and 11 months; and E. N. Dubay, 5 years and 8 months.
/2/ For purposes of the above table, the annual Social Security Covered
Compensation benefit ($39,444) was used in the excess benefit
calculation.
/3/ Under the Internal Revenue Code, the annual compensation of each
employee to be taken into account under the Retirement Plan for 2001
cannot exceed $150,000, as adjusted for increases in the cost of living
for plan years beginning after December 31, 1993. The maximum amount for
2001, as adjusted, is $170,000.
/4/ Amounts are estimates only and would be subject to adjustment based on
rules and regulations applicable to the method of distribution and
survivor benefit options selected by the retiree. The Retirement Plan
provides that retirement benefits would be actuarially reduced for
retirement prior to age 65.
/5/ The compensation covered by the Retirement Plan benefit formula is the
basic salary paid to an employee within the employee's final average
earnings. The final average earnings means the employee's highest
earnings during any sixty consecutive months during the last 120 months
of employment. For any employee named or shown in the Summary
compensation table who retires with vested benefits under the Plan, the
compensation shown as "salary" in the Summary compensation table could
be considered covered compensation in determining benefits, except that
the Plan benefit formula takes into account only a fixed percentage of
final average earnings which is uniformly applied to all employees. The
amount of covered compensation that may be considered in calculating
retirement benefits is also subject to limitations in the Internal
Revenue Code of 1986, as amended, applicable to the Plan.
-26-
ONEOK, Inc. Supplemental Executive Retirement Plan
The following table sets forth the estimated benefits payable upon retirement
at age 65 to a covered participant under the ONEOK, Inc. Supplemental Executive
Retirement Plan ("SERP"). The estimates assume that a covered participant is
fully vested. The amounts shown would be reduced for commencement prior to age
60. SERP benefits are offset by benefits payable under the Retirement Plan.
Estimated annual benefits at indicated age of retirement
--------------------------------------------------------
50 and under 55 60 65 and over
------------ -------- -------- -----------
$125,000 $ 62,500 $ 70,000 $ 73,563 $ 77,125
$150,000 $ 75,000 $ 84,000 $ 88,275 $ 92,550
$175,000 $ 87,500 $ 98,000 $102,988 $107,975
$200,000 $100,000 $112,000 $117,700 $123,400
$225,000 $112,500 $126,000 $132,413 $138,825
$250,000 $125,000 $140,000 $147,125 $154,250
$300,000 $150,000 $168,000 $176,550 $185,100
$400,000 $200,000 $224,000 $235,400 $246,800
$450,000 $225,000 $252,000 $264,825 $277,650
$500,000 $250,000 $280,000 $294,250 $308,500
The SERP covers certain elected or appointed officers of ONEOK, and certain
other employees in a select group of management and highly compensated
employees of ONEOK. Participants are selected by the CEO, or in the case of the
CEO, by the Board of Directors.
Benefits payable to participating employees under the SERP are based upon a
specified percentage (reduced for early retirement) of the highest 36
consecutive months' compensation of the employee's last 60 months of service.
The SERP will, in any case, pay a benefit equal to the benefit which would be
payable to the participant under the Retirement Plan if the limitations imposed
by the Internal Revenue Code Sections 401(a)(17) and 415(b) were not
applicable, less the benefit payable under the Retirement Plan with such
limitations. Benefits under the SERP are paid coincidentally with the payment
of benefits under the Retirement Plan or as the administrative committee may
determine. SERP benefits are offset by benefits payable under the Retirement
Plan.
ONEOK provides for funding of this benefit through a trust arrangement commonly
referred to as a Rabbi Trust.
The Board of Directors may amend or terminate the SERP at any time; however,
benefits to current participants may not be reduced.
-27-
Change in control and termination agreements
During 2001, ONEOK, Inc. amended its termination agreements with each of its
named executive officers to standardize the change in control provisions with
ONEOK's other documents. Each of the termination agreements has a three-year
term, but will be extended automatically in one-year increments after
expiration of the initial three-year term unless ONEOK provides notice to the
officer at least 90 days before the January 1 preceding the initial termination
date of the agreement that it does not wish to extend the term.
Under the termination agreements, severance payments and benefits are payable
if there is a change in control of ONEOK and the officer's employment is
terminated without "just cause" or for "good reason" at any time during the
three years after the change in control, or for Mr. Kyle, for any reason by the
executive within twelve months of the change in control. In general, these
severance benefits include:
.. a lump sum payment in an amount equal to three times the officer's then
current annual compensation, plus a prorated portion of the officer's
short-term incentive compensation;
.. accelerated vesting of retirement and other benefits under ONEOK's SERP;
.. continuation of welfare benefits for thirty-six (36) months;
.. for Mr. Kyle, gross up payments to cover any excise taxes due if any
portion of his severance payments constitute excess parachute payments;
and
.. for each of the other named executive officers, severance payments will
be reduced if the net after-tax benefit to such named executive officer
exceeds the net after-tax benefit if such reduction were not made. ONEOK
will make gross up payments to such officers only if the severance
payments, as reduced, constitute excess parachute payments.
Calculated using base salary and bonus levels during 2001, and assuming a
December 31, 2001, change in control and termination date, payments under the
termination agreements (excluding any gross up payments) with ONEOK's named
executive officers would have been: D. L. Kyle, $6,864,888; J. C. Kneale,
$2,847,044; J. W. Gibson, $2,212,710; J. A. Gaberino, Jr., $1,837,685; and E.
N. Dubay, $1,849,243.
Under each termination agreement, a change in control will occur upon:
.. The acquisition by any "person" of beneficial ownership of 20% or more of
the outstanding voting securities of ONEOK, except (1) voting securities
acquired in a "non-control acquisition," including an employee benefit
plan maintained by ONEOK or one if its direct or indirect majority-owned
subsidiaries or affiliates (a "related person"); (2) ONEOK or a related
person; or (3) voting securities acquired by any person in a "non-control
transaction" (defined below);
.. A change in the composition of ONEOK's board of directors as of 02/15/01
and any additional directors approved by a vote of at least two-thirds of
the incumbent board, after which the incumbent directors (or their
designees) no longer constitute at least a majority of the members of the
board of directors of ONEOK or any parent corporation that results from a
merger;
.. The consummation of a merger, consolidation or reorganization with or
into ONEOK or in which securities of ONEOK are issued (a "merger"),
except mergers that are a non-control transaction. A "non-control
transaction" occurs when (1) immediately after the merger, ONEOK's
stockholders beneficially own at least 50% of the outstanding voting
securities of the surviving entity or its parent; as long as no other
third party beneficially owns 50% of the outstanding voting securities of
the surviving corporation; (2) ONEOK's incumbent directors before the
merger constitute at least a majority of the board of the surviving
entity or its parent; and (3) no person, other than (a) ONEOK or its
related persons, (b) an employee benefit plan maintained by ONEOK or its
related persons, or (c) any person who, immediately before the merger,
owned 30% or more of ONEOK's outstanding voting securities, has
beneficial ownership of 30% or more of the outstanding voting securities
of the surviving entity or its parent;
.. A complete liquidation or dissolution of ONEOK; or
.. The sale or other disposition of all or substantially all of ONEOK's
assets to any person, except (1) transfers to a related person; (2)
transfers under conditions that would constitute a non-control
transaction, with the disposition of assets being regarded as a merger
for this purpose; and (3) the distribution to ONEOK's stockholders of the
stock of a related person or any other assets.
-28-
Special Exceptions. Acquisitions of ONEOK voting securities over the 20%
threshold by any person will not trigger a change in control if:
.. the acquisition occurs as a result of the acquisition of voting
securities by ONEOK that reduces the total number of shares then
outstanding and increases the proportional number of shares beneficially
owned by each shareholder (e.g., a stock buyback program);
.. within five business days after a change in control would have occurred,
the shareholder who has acquired 20% or more of ONEOK's voting securities
divests itself of sufficient shares to fall below 20%; or
.. after a person discovers or is notified by ONEOK that its acquisition of
shares would have triggered a change in control, the person notifies the
board of directors that it acquired the shares inadvertently, and within
two business days after such notification, the person divests itself of a
sufficient number of shares to fall below 20%.
Western Resources Exceptions. A change in control will not occur if:
.. Western Resources and/or its affiliates (the "shareholder group") acquire
beneficial ownership of 15% or more of ONEOK's voting securities under
the terms of the Shareholder Agreement, until the earlier of (a) the
termination of the Shareholder Agreement or (b) the successful
consummation of a Buyout Tender Offer as defined in Section 3.6(b) of the
Shareholder Agreement; or
.. the equity securities of ONEOK owned by the shareholder group are
restructured with the approval of a majority of the members of ONEOK's
existing board (excluding nominees of Western Resources).
-29-
Section 16(a) beneficial ownership reporting compliance
ONEOK believes that during Fiscal 2001 all Securities and Exchange Commission
filings of its officers, directors and ten percent shareholders complied with
the requirements of Section 16 of the Securities Exchange Act, based on a
review of forms filed, or written notice that no annual forms were required.
Other matters
We do not know of other matters that are likely to be brought before the
meeting.
By order of the Board of Directors
/s/ John A. Gaberino, Jr.
John A. Gaberino, Jr.
Senior Vice President, General Counsel,
and Corporate Secretary
Tulsa, OK
April 10, 2002
-30-
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
--------------------------------------------------------------------------------
ONEOK, Inc.
--------------------------------------------------------------------------------
CONTROL NUMBER:
--------------------------------
Please be sure to sign and date this Proxy. Date
--------------------------------------------------------------------------------
----Shareholder signature--------------------Co-owner signature-----------------
1. Election of Directors - Nominees
For All
For Withhold Except
(01) William M. Bell, Class B
(02) John B. Dicus, Class B [_] [_] [_]
(03) David L. Kyle, Class B
(04) Pattye L. Moore, Class B
NOTE: If you do not wish your shares voted "For" a particular nominee, mark
the "For All Except" box and strike a line through the name(s) of the
nominee(s). Your shares will be voted for the remaining nominee(s).
For Against Abstain
2. Ratify the appointment by the Board [_] [_] [_]
of KPMG LLP as principal indepen-
dent auditor of the Company and its
consolidated subsidiaries for the
fiscal year ending December 31, 2002.
Mark the box at the right if your address has changed and note
the change(s) in the space provided on the reverse side of this [_]
card.
DETACH CARD DETACH CARD
ONEOK, Inc.
ONEOK, Inc. encourages you to take full advantage of convenient ways by which
you can vote your shares - by either telephone or the internet. Please see the
reverse side of this card for more details.
This card also provides voting instructions for shares held in the ONEOK, Inc.
Direct Stock Purchase and Dividend Reinvestment Plan and the Thrift Plan for
Employees of ONEOK, Inc. and Subsidiaries as described under "Voting Methods" in
the accompanying Proxy Statement.
ONEOK, Inc.
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints DAVID L. KYLE and JOHN A. GABERINO, JR., jointly
or individually, with full power of substitution, to represent and vote the
shares of common stock, $0.01 par value, of ONEOK, Inc. held of record by the
undersigned on March 18, 2002, at the Annual Meeting of Shareholders to be held
at the Company's Corporate Offices, 100 West Fifth Street, Tulsa, Oklahoma, on
Thursday, May 16, 2002, at 10:00 a.m., and at any adjournment or postponement
thereof, as indicated on the reverse side.
Trustee's Authorization. The Undersigned Authorizes UMB Bank, N.A., to tabulate
all shares of Common Stock of the Company credited to the undersigned's account
and the Trustee to vote all shares of Common Stock under The Thrift Plan for
Employees of ONEOK, Inc. and Subsidiaries at the annual meeting in accordance
with the instructions on the reverse side.
--------------------------------------------------------------------------------
Please sign exactly as your name(s) appear(s) on the reverse side of this card.
If your shares are held jointly, any one of the joint owners may sign.
Attorneys-in-fact, executors, administrators, trustees, guardians or corporation
officers should indicate the capacity in which they are signing.
--------------------------------------------------------------------------------
PLEASE NOTE ADDRESS CHANGES HERE
----------------------------------------
----------------------------------------
----------------------------------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
/\ FOLD AND DETACH HERE /\
YOUR VOTE IS IMPORTANT!
If you vote by telephone or the Internet, DO NOT return your proxy card.
VOTE BY
TELEPHONE *** INTERNET *** MAIL
24 hours a day -- 7 days a week
--------------------------------------------------------------------------------
TELEPHONE
1-800-758-6973
(Toll Free)
.. Use any touch-tone telephone
.. Have this proxy card in hand
.. Enter the Control Number located on the reverse side of this card when
prompted
.. Follow the simple recorded instructions
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INTERNET
http://www.eproxyvote.com/oke
-----------------------------
.. Click on the website address indicated above
.. Have this proxy card in hand
.. Enter the Control Number located on the reverse side of this card
.. Follow the simple instructions on the screen
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MAIL
.. Mark, sign and date the proxy card on the reverse side
.. Detach the proxy card
.. Return the proxy card in the postage-paid envelope provided
--------------------------------------------------------------------------------